Final answer:
Tips received by employees from customers are generally considered taxable income and should be included in their gross income.
Step-by-step explanation:
Tips received by employees from customers are generally considered taxable income and should be included in their gross income. Although tips are often given voluntarily by customers, they are still considered compensation for services rendered and are subject to income tax.
In the United States, the Internal Revenue Service (IRS) requires employees to report their tips as part of their income. This includes not only cash tips but also tips received through credit card payments, tip pools, and shared tips. The employer is required to report the total amount of tips received by each employee to the IRS.
It is important to note that there are specific rules and regulations governing the reporting and taxation of tips, and they may vary based on the jurisdiction. It is recommended for employees to consult a tax advisor or refer to the relevant tax laws for accurate and up-to-date information.